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Comment by lastofthemojito | Hacker News Reader

> I'm seeing single-family houses going for $310k that should be going for maybe 2/3rds of that on a good day.

I've been hearing a lot of "should be" talk like that recently - like folks complaining that people are paying $50k for a normal SUV that "should be" $30k or whatever.

What are we basing "should be" on? Some affordability metric? Our gut feeling about what a comparable thing cost a few years ago?

If I sold my house and someone told me I should have sold it for 2/3 of what I sold it for, I think I'd sit in stunned silence for a moment and then just laugh.

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It's a 60+ year-old single-family, single-garage home within eye (and more importantly, ear) shot of a major interstate highway next to the home of a man who has a number of city code violations due to the state of his property (think rank weeds, cracked paint, tires in the yard, etc.) in a major Midwestern city where the average household income is ~$56,000.

When you consider who this kind of housing was built for - younger married couples with two children - the problem becomes apparent. You can't cover COL, costs of raising children, a mortgage on a $310k house at 7% interest, an auto loan note at the same, and student loan debt on $56k household income. Wages are stagnant, so something has to go. Typically, it's the idea of children or the idea of owning a house. This has implications for the economy 20 years from now. There won't be as many consumers and workers to participate in the market, and those that do exist are likely to have access to less generational wealth because their parents were more likely to rent than to own. Neither bodes well for economic growth or stability. That's what I mean by "should cost" - a value that allows for a seller to sell a home at a reasonable price to a party that wishes to carry out the life stage activities that provide for future economic growth.

I'm looking out the window of my real estate office toward a neighborhood a lot like what you are describing - except our median income is abut $20K less and we aren't in the midwest. Those houses here would be within the same range you are talking about, and it's just basic supply+demand, plus the replacement cost. What does that same house cost today to build? It may not seem fair, but that's why even the "affordable" suburban tract housing in my area starts in the high-300s.

I wouldn't describe it as a matter of fairness, thinking deeper about it.

We're really just mortgaging quarterly earnings for those with major residential real estate holdings (like pension funds paying out to those born during the Baby Boom) with future economic growth at this point. When asked if they'd rather have sustainable growth that will see them able to put food on their tables 20 years from now or make the line go up over the next 90 days, capital has chosen the latter. That _will_ have a consequence down the line, and it won't be a good one.

The other user brought up that the cost to build a home has gone up substantially, and this response seems more like an addendum onto what you were already saying rather than a response to that. Just fyi. I think there is inherent truth to what you're saying as well, in that business decisions more often than not seem driven by the dangling carrot of short term profits. But there can be a multitude of reasons why the cost of a house is just out of reach to what we used to consider the "average middle class American."

What builders/bankers want to build costs more. A 3br/2ba/2ga split-level isn't as profitable as, say, an upper-middle-class McMansion.

Ah, I think I get you now - you are talking more about issues of wealth or opportunity inequality, IE: structural problems, where perhaps the housing is really a symptom as much as a cause. It's a rubber-hits-the-road view of what's happening overall.

Ultimately, while it is certainly a problem that housing is this expensive, the deeper, more structural problem is that incomes are still this low. It's been 40 years now since incomes started stagnating compared to productivity; anyone who thinks this wasn't going to have serious negative effects on society and the economy had really better wake up, because we're already seeing those effects.

Amen dude - can't agree more. Wish more communities were paying attention to this as a component of their housing issue.

Homes 'should' be affordable to the people who live there. I.e. I would hope the median housing costs are no more than a third of the median take home pay for the average resident. Now, I'm not going to sit here and advocate for price fixing, but you can do a few things.

1. Ban AirBnB short term rentals by people who do not own and live in the house.

2. Ban foreign ownership of real estate. A nations laws are there for the benefit of its people, not some random billionaire from china looking for a place to park his money.

3. Much more relaxed zoning, preferably at a national level, or at the very least, at state level. Something akin to Japan where multi-tenant residential housing is permitted in all but a few zones.

If all of the above were in place, I'd have no problem with houses going for 'whatever the market will bear'. Sadly our housing market is captured by people with vested interests in making home ownership unaffordable for most.

These are popular ideas in many places, but here are just some things to consider:

1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much.

1b) Highest and best use is a really important concept. There are properties that make for not great permanent dwellings but are great short-term rentals. When you put artificial restrictions in place, it doesn't actually help supply.

2) There is so much money here in the US that even banning foreign ownership doesn't matter much. I live in a tourist / second-home market and it's people from the region who are buying up the investments.

3a) My community went to relaxed zoning years ahead of the state. Helped a little, but not as much as everyone hoped. Turns out that it is still expensive to build multi-family, ADUs, etc and not a fit for every life need.

3b) While zoning changes are good, I continue to hammer on income / jobs as a bigger factor in many markets. Don't come at me with SFO or some other example - every market is going to be different. But in places like mine, the make up of the economy is a bigger factor to affordability than zoning or these other changes. Fixing the whole regional economy is not a simple problem and it doesn't campaign well in political stump speeches like "fix zoning" does.

> 1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much.

On the contrary: you've changed the housing supply in your town. Sure, some of the money will go to the next town over, but if you're running your town as if it's a business you deserve to end up with a hollow wasteland.

> 2) There is so much money here in the US that even banning foreign ownership doesn't matter much. I live in a tourist / second-home market and it's people from the region who are buying up the investments.

Given what I've heard about the amount of properties being bought up by Chinese investors (which tracks with what else I know about the market and how China has been progressing in recent years, so I have no reason to doubt it), I think it unlikely that, were they all to be forced out of the market, domestic investors would be able to simply fill the vacuum with no net change. Investment dollars chasing real estate may be far more plentiful than is healthy, but they are not infinite.

>On the contrary: you've changed the housing supply in your town.

Obvs every market is going to have its nuances and differences... in my area, the largest city banned new STR a few years ago - and absolutely nothing changed. Ironically, the smaller city next door that didn't ban is growing and thriving on multiple levels in ways the town that banned is not. Likewise, because the county (and next county over as well, which is just a few mile away) didn't ban, all it really meant was that city that put in place a ban received less tourism tax revenue while all the other entities benefitted.

The other nuance I was trying to communicate - we had a lot of housing built during the war to support the training base. They are great little houses for a weekend visit, but they stink as permanent dwellings. This is a part of the supply / inventory problem I don't hear discussed enough. For example, if you have a ton of 4000 square foot houses ($$$$) but your buyers are all first-time / first-upgrade types ($$), you've still got an inventory problem.

I'm guessing that is the case. Condos next door that cost $210k before covid now in the exact same spot three years alter asking for $630k is probably making people ask questions about the market.

its all about affordability. I'm a 26 year old a software developer but have to live with my parents for the foreseeable future....

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